To prevent fraud and theft, transaction cards such as credit cards, debit cards, and stored value cards may be issued in an inactive state, where the card must be activated prior to use. A separate activation step can serve at least two important goals. First, it can ensure that the card is in the possession of the rightful cardholder. For instance, cards may be activated when the rightful cardholder verifies receipt, such as by accessing a central processor (e.g., via phone) and providing personal identification information. Second, activation can ensure that the card has been validly purchased for legitimate value (and not stolen). For instance, a prepaid card may be activated at the time it is purchased for valid funds, e.g., by scanning a barcode or magnetic stripe on a package that contains the card at a point of sale and receiving payment for the card.
After activation, transaction cards may be used to purchase goods and services from merchants. Most transaction cards such as credit cards, debit cards, and stored value cards have a single magnetic stripe that stores magnetically encoded data associated with an account. The magnetic stripe is swiped at merchant terminals in transactions where cardholders access value or credit in the account to purchase goods and services. Typically the magnetic stripe is encoded with data that enables transactions where card account funds are accessed over a communications network such as a credit or debit network. The magnetic stripe may also be encoded only for activation purposes, and the regular functioning of the card may not require a magnetic stripe. For instance, phone cards may display a PIN used for wireless phone calls that is activated by swiping a magnetic stripe on the card; thereafter, the magnetic stripe is not needed to access the value of the PIN.